The OECD and the problems of basic income

The OECD and the problems of basic income

According to the OECD, basic income (BI) is not an effective tool for reducing poverty. However, the outcome would depend on the model chosen for implementing a BI system, as well as the changes made in other parts of social protection.

 

The Organisation for Economic Co-operation and Development (OECD) published in May a Policy Brief paper studying the feasibility of a basic income model in four OECD countries, one of which was Finland.

On June 16, Kela organized a seminar in which Herwig Immervoll, a senior economist at the OECD, discussed the findings of his study and analysed the strengths and weaknesses of a BI scheme. After the seminar, the national broadcasting company YLE reported: “Universal basic income might increase poverty and inequality”.

Apart from Finland, the OECD study includes France, Italy and the United Kingdom. The analysis was done with the help of the EUROMOD microsimulation model. In each country, the starting point for the analysis was to take all existing spending on social cash-transfers together and see what level of BI they would amount to. Eventually, the level of BI was set near the existing levels of guaranteed minimum-income benefits for single individuals in each country, adjusted so that it would not increase the public expenditures.

In Finland, this resulted a BI of 527 euros for the working age adults and 316 euros for children and youth under 18 years of age. Those entitled to old-age pensions within the current main statutory retirement age (in Finland over 65-year-olds) were excluded from the BI model.

In the BI model used in the OECD analysis, all existing working-age benefits (including social insurance benefits) apart from cash transfers for housing and disability would be abolished. Also, the zero-rate tax bands of income-tax schedules and equivalent tax-free allowances would be abolished, and all income-tax thresholds would be shifted downwards by a corresponding amount. BI would be made taxable under personal income taxation alongside other taxable incomes.

The OECD model would create many gainers and losers

The most important outcome of the OECD study is that the simulated BI model would strongly impact the income distribution in all studied countries. However, the effects vary greatly among the countries.

In all income groups, the BI model would create many gainers and losers. It would change the net income of most people in one way or another. It would lift some groups out of poverty and thrust others below the poverty line.

The simulated BI model would increase the income level of those small income groups who are currently not receiving any social benefits, or whose benefit level is very low. In turn, those receiving earnings-related benefits or several means-tested benefits would see a decline in their standard of living.

In Finland, those below 65-years-old receiving old-age pensions and single parents with low incomes would be among the losers of the model. The middle-income earners instead would generally benefit from the model.

The conclusion of the OECD is that particularly in countries with a comprehensive social protection BI is not an efficient tool for reducing poverty, since it does not target the benefits effectively. According to the OECD, a budget-neutral BI would not be distributionally neutral. High enough to be socially and politically meaningful and fiscally realistic, a BI would still require tax rises as well as reductions in existing benefits.

A very low basic income, instead, would have little other significance but increase poverty.

The outcomes of BI depend on reforms in taxation and social protection

How the findings of the OECD study are to be interpreted in the Finnish context?

Perhaps the most important issue that the research sheds light on is the fact that there are many institutional challenges in implementing a BI system, and those challenges differ among countries due to their different systems of social security and taxation.

As the OECD report (p. 5) notes, BI as an idea is simple, but the existing social protection systems are not. Therefore, there are grounds to argue that the same model of BI does not fit everywhere. If a reform such as BI were to be carried out, it needs to be adjusted to the existing institutions of social protection and taxation in each country separately. The parameters of the model should be adjusted so that it will not produce excessive changes in people’s incomes.

The greatest problems of the OECD’s microsimulation are that the income taxation is not changed to correspond with the BI model, and that the existing systems are demolished by the same means everywhere without examining the structures of social protection in each country separately. Due to this, BI seems to have unpredictable effects to income distribution.

The income distribution produced by a BI model can be influenced by adjusting the parameters of taxation and social security. In his presentation at the Kela seminar, Herwig Immervoll mentioned that tax reforms should be discussed in parallel with BI. Indirect taxes, such as environmental or value added taxes, have often been proposed as a complementary source for financing a BI scheme, combined with income taxation.

However, the OECD report does not mention these alternatives, and the premise seems to be that taxation in any form should not be increased.

In Finland, as well as in many other countries, some organisations and individuals have launched models of BI adjusted to the local context. Their objective has often (yet not always) been to not radically alter the income distribution or cause reductions in people’s after-tax incomes, especially in the lowest income groups. Microsimulation has been employed at least in the models of partial BI by the Green Party and the Left Alliance, and in the preliminary study for the national BI trial conducted by Kela.

In these models, BI is linked with a reform in income taxation that is designed so that radical changes in after-tax incomes will not occur in any income group. The aim is also to make the models budget neutral, that is, to cover the costs of BI by reforms in taxation and replacing the existing benefit systems. In these models, the old system will be abolished only in those parts where the level of benefits is lower than the BI.

One of the problems with the BI trial currently underway is that due to time constraints, the taxation reform proposed by the research team that designed the experiment was not included.

Will Finland implement a BI?

Though there exist BI models in Finland that would technically allow implementation of a BI system without radical changes in income distribution or public financing, the road of BI will probably be rocky even here.

The preparations of the BI experiment scheme revealed many institutional challenges in implementation of a BI model. The greatest obstacles for a BI are, however, ideological.

In Finland, BI has gained interest especially as a possibility to improve the incentives for paid work. The possibility to combine wages with social benefits more smoothly than today is an issue that no party opposes. Yet, many still find it morally wrong to give people money with no obligations. The opponents of BI fear that the “free money” would reduce people’s willingness to work and give a moral legitimacy to not apply for jobs.

If the only, or at least the most important function of BI is to improve work incentives, the great promises of BI may not be fulfilled after all. The preliminary studies for the BI trial revealed that BI models do not always unambiguously remove incentive traps, if parts of the old social security stay intact.

However, it seems likely that in Finland, as well as in other industrialised countries, the social security will be reformed in a direction that may contain some elements of BI, but not necessarily a ‘pure’ BI model.

If the political thinking emphasizing the labour supply and austerity in public economy prevail, the prospects for more generous BI models seem to be low. In the framework of current economic policies, the implementation of a BI would most probably mean at least demolishing large parts or other forms of social security.

BI as a social dividend?

The OECD report (p. 8) ends up recommending some kind of ’partial’ alternative of a BI model. One option mentioned is a possibility to introduce BI as a separate system from the existing social protection, whose function would be to share the benefits of globalisation and technological progress more equally.

This idea of ‘social dividend’ has often appeared in BI discussions. The state of Alaska is already giving an annual share of the permanent fund based on oil revenues to each citizen as a social dividend. There is similar thinking linked also to the idea of “helicopter money”, originally introduced by Milton Friedman, a cash transfer paid by the central bank to people’s accounts to stimulate consumer demand in economic downturns.

Considering BI as a social dividend would locate it in a new frame, where its function would not be to fix the problems of social security systems, but to distribute purchasing power also to those who lose their jobs or end up in low paid precarious jobs in the labour market turmoil caused by digitalization.

If BI were paid on top of other social benefits, its level could even be lower, or for instance connected to macro economy indicators. In that case, it could also be used to stimulate economies in downturns.

 

Johanna Perkiö
M.Soc.Sc., Doctoral Candidate
University of Tampere
email: johanna.perkio(at)uta.fi

 

Original article:

Johanna Perkiö, “The OECD and the problems of basic income“, Kela, June 30, 2017.

China: A city social dividend proposal captures national attention

Shenzhen City

Shenzhen is one of the four current first-tier cities in China, and the other three are Beijing, Shanghai and Guangzhou. In February 2017, Shenzhen Innovation and Development Institute, a famous think tank founded in 2013, issued an “Outline of Shared development in Shenzhen”, which calls for a social dividend program in a package of reform measures.

Shenzhen is the first Special Economic Zone in China. In 1980, it was a poor rural area with 30,000 people. But now, more than 30 years later, it has a population of almost 20 million, with 11.9 million local permanent residents. Its total GDP is similar to Hong Kong, one of China’s Special Administration Regions. Shenzhen citizens’ per capita GDP was US $25,400 in 2015, and it is stepping into global middle developed cities. “The Sharing Shenzhen” is a new strategy after the previous “The Speed Shenzhen” and “The Quality Shenzhen”.

Although Shenzhen’s nominal per capita GDP is similar to that of South Korea, its per capita disposal income is only half of the latter’s. At the same time, the housing price in Shenzhen is double that of South Korea. Most people are living in substandard conditions, especially those 8 million non-permanent residents who have been totally excluded from the local social security system. Furthermore, no matter their income levels or social security levels, there are big gaps among even permanent residents. The Gini coefficient in Shenzhen per capita income is almost 0.5.

Shenzhen is thus facing a very big challenge of adjusting income structures to achieve social justice. Twenty Suggestions for “The Sharing Shenzhen Outline” include:

  1. One billion tax relief program, to help enterprises and people;
  2. To continue to raise the minimum wage;
  3. To raise working income and expand the proportion of middle-income workers;
  4. To improve the salaries and benefits of civil servants, so that the city managers can share the fruit of urban reform and development;
  5. To establish state-owned capital dividend fund, letting all the people share the results of reform and development of state-owned enterprises;
  6. To restart the “common prosperity” plan, to reduce the gap between permanent residents and the immigrants;
  7. To raise and expand the minimum guarantee income system, to cover the whole population;
  8. To expand the social assistance system to the medium income families including the immigrants;
  9. To establish a more equitable social security system covering the immigrants;
  10. To put the non-household residents into the housing security system, to achieve the safe living dream for everyone;
  11. To establish the welfare and service system for the elderly;
  12. To establish the universal social welfare and relief policies, so that Shenzhen’s warmth and sunshine can reach all children;
  13. To develop social charity system;
  14. To reduce the subway and bus fares;
  15. To promote equal employment;
  16. To promote fair education;
  17. To reform the expensive medical system;
  18. To relax the conditions of household registration, to make more people permanent residents;
  19. To control and reduce the high housing prices, to make young people full of hope and dream;
  20. All residents to enjoy the right of participation in social management and assume the obligations.

For the specific suggestion No. 5, the outline suggests Shenzhen should learn from Singapore, Hong Kong and Macau to give citizens a social dividend from the city’s fiscal surplus. In 2015, Shenzhen had 918.1 billion yuan [US $135.9 billion] total assets of state-owned enterprises, 461.6 billion yuan [US $68.3 billion] net assets, and 36 billion yuan [US $5 billion] profit. In addition to the corporate tax, the municipal government should get their net profit of 12.7 billion yuan [US $1.88 billion] per year as shareholders. Based on the average dividend payout ratio of Chinese listed companies, at least one third of the annual net profit could be distributed in cash as social dividend among all the residents. Given present figures, that would be 1,000 yuan [US $148] every two years for every resident. While this dividend might appear small, it is just a very conservative part of the net profit, and we can expect an increase in the future.

In the above description, Shenzhen is basically China’s miniature. The whole country faces similar problems and situations. So this plan captured the national attention after its announcement. Additionally, the director of the Shenzhen Innovation and Development Institute, Zhang Siping, is the former deputy mayor of Shenzhen city itself, and many councilors of the Institute are formerly from government sectors. They know the real crux of the city’s development, and they are making a fair plan out of their offices. This is another reason why “The Sharing Shenzhen Outline” is so striking in China.

In fact, China has not only local but also national state-owned enterprises, and the latter ones have much bigger profits. “The Sharing Shenzhen Outline” mentions only the former. All Chinese people could expect to get a national dividend plus a local one in the future.

 

More background information at:

Karl Widerquist, “SINGAPORE: Government gives a ‘growth dividend’ to all adult citizens”, Basic Income News, June 8th, 2011

Special thanks to Kate McFarland for reviewing this article.

Dutch Government authorizes social assistance experiments in five municipalities

Dutch Government authorizes social assistance experiments in five municipalities

The municipalities of Groningen, Wageningen, Tilburg, Deventer, and Ten Boer have received permission from the Dutch Ministry of Social Affairs and Employment to proceed with proposed social assistance experiments.

Jetta Klijnsma, CC BY 2.0 Partij van de Arbeid

Jetta Klijnsma, State Secretary of Social Affairs and Employment, signed the authorization of the five municipal experiments on July 3, 2017.

Groningen and Ten Boer will be carrying out their experiments in cooperation with one another.

In each of the experiments, which will run for two years, participants will be randomly selected from a pool of current social assistance beneficiaries (with participation voluntary for those selected), and assigned either to a control group or to one of several treatment groups.

Each experiment has at least three treatment groups, testing the following types of interventions: (1) removing reintegration requirements (e.g. job applications and training programs) on welfare benefits; (2) providing a more intensive form of reintegration service; (3) permitting participants to earn additional income on top of their welfare benefits. Subjects assigned to the third treatment groups will be permitted to retain 50% of additional earned income, up to a maximum of €199 per month, for the duration of the two-year experiment. In contrast, under current policy, welfare recipients are permitted to keep only 25% of additional income, and only for up to six months.

The Groningen / Ten Boer experiment includes a fourth treatment group, in which participants are permitted to choose to join any one of the three preceding groups.

Although international media have referred to these experiments as “basic income experiments”, the description is a bit of a misnomer. In all treatment groups, benefits remain means-tested and household-based, and participation is limited to current welfare recipients. Moreover, legal constraints create an effective demand on participants to seek work (on pain of removal from the experiment); this effective conditionality, unique to the Dutch experiments, is discussed below.

Sjir Hoeijmakers, an econometrician who consulted municipalities in their design of the experiments, prefers to speak of “experiments in the context of the Participation Act” (cf. this Basic Income News article), while others refer to “social assistance experiments”.

The experiments are expected to begin around October 1 of this year.

The Ministry of Social Affairs and Employment is currently reviewing applications from three additional municipalities who also wish to conduct experiments on social benefits: Amsterdam, Nijmegen, and Utrecht. Decisions on these proposals are expected later in the summer.

 

Update: Shortly after the publication of this article, Nijmegen was granted permission to carry out its experiment, which will commence on December 1. A full report on Nijmegen’s experiment will follow. 

 

Background

The municipalities of Groningen, Tilburg, Wageningen, and Utrecht have been planning social assistance experiments since 2015, following the enactment of the Dutch Participation Act. Originally, these experiments were conceived as trials of unconditional basic income (or at least policy moving in this direction), although political pressures encouraged their proponents not to use the term “basic income” (which is popularly associated in the Netherlands with utopian thinking and celebration of laziness). Under the Participation Act, municipal officials are required to implement obligations and sanctions to encourage recipients of social assistance benefits to seek employment. For example, beneficiaries are generally expected to complete a set number of job applications per week, participate in training programs, and attend group meetings as conditions on receiving their benefits. Skepticism regarding the effectiveness of these conditions was a main motivation of the experiments.

In September 2016, Klijnsma authorized municipalities to perform experiments, up to two years in duration, testing the effects of altering the conditions of the nation’s social assistance benefits. This authorization was granted, however, only under strict terms of compliance with the nation’s Participation Act, which effectively prevent the municipalities from testing an unconditional basic income (despite interest in the idea from researchers and promoters of the experiments). For example, in the case in which an experiment treatment involves the removal of work reintegration requirements, the Ministry mandates that officials assess test subjects after six and twelve months to verify that they have made adequate effort to find employment; those who have not done so are subject to dismissal from the experiment.

The Ministry also capped the amount of earned income that participants are permitted to retain on top of their benefits, and required that any experiment including a treatment group with relaxed conditions on social assistance also include a treatment group with stricter conditions.

In the face of these constraints, researchers were forced to design experiments farther from “basic income experiments” than originally desired.  

 After announcement of a start date of May 1, 2017, Utrecht saw its proposed experiment put on-hold due to a failure to comply with the terms of the Participation Act. The city has since submitted a revised proposal to the Ministry of Social Affairs and Employment, which is pending evaluation.  

Another municipality, Terneuzen, proposed a small-scale study of basic income–providing unconditional cash payments of €933 to 20 test subjects–which was axed by Klijnsma earlier in the year. Terneuzen has not submitted a new proposal to the Ministry of Social Affairs and Employment.

In a recent presentation to the Dutch branch of BIEN, Sjir Hoeijmakers stated that 45 municipalities are considering social assistance experiments.

 

More Information

Eerste vijf gemeenten krijgen toestemming voor bijstandsexperimenten” (July 3, 2017). Official press release of the Dutch government.

Charlotte Huisman, “Vier steden mogen experimenteren met soepelere bijstand,” Trouw, July 3, 2017.

Should the Netherlands test the basic income,” EuroTopics, July 4, 2017.

 

Previous Basic Income News Coverage

Florie Barnhoorn, “The Netherlands: All that’s left is the action. Where do we stand with the experiments?” (June 2, 2017).

Kate McFarland, “THE NETHERLANDS: Social Assistance Experiments Under Review” (May 9, 2017).

Florie Barnhoorn, “NETHERLANDS: Design of BI Experiments Proposed” (October 26, 2016).


Information provided by Florie Barnhoorn, Hilde Latour, and Ruud Muffels.

Photo (Tilburg) CC BY-NC-ND 2.0 Stephan Ohlsen

I had something like a basic income; here are nine ways it influenced my views

I had something like a basic income; here are nine ways it influenced my views

For me, a job-unconditional basic income guarantee was simply a part of the life to which I grew accustomed as a young adult. In this piece, I describe how this experience has influenced my hopes and expectations concerning the effects of basic income as a policy.

The Author (circa early Graduate School)

Entering college as a scholarship student, I moved directly into a life in which I received a monthly living stipend that was not conditional on holding or looking for paid employment. There were, of course, some other conditions on the funding; I was, for instance, required to take classes at the university and make “sufficient academic progress” by some measure.

However, my “salary” was not contingent on anything that felt like being employed: I didn’t need to keep 9-to-5 hours, work in an office, report to a boss, or dress professionally — and, most importantly, I didn’t have to plan any aspect of my life around the question “What will people pay me to do?” I just took classes that interested me, which I invariably selected without consideration of the potential “market value” of the knowledge and training.

After about six years of such a lifestyle, I entered the “paid workforce” as a graduate teaching associate, an arrangement in which monthly pay continued to feel more-or-less disconnected from work, despite the addition of some new obligations. Now in my 30s, I’ve never worked a full-time job or signed an employment contract for more than a year — and I’ve continued, for the most part, to keep my deliberation about how to lead my life at a remove from questions of how to make money.

Certainly, there are significant differences between university scholarships and fellowships and a true basic income. Moreover, I am but one person, and individual cases are sure to vary considerably. Nonetheless, I believe that I came to adopt a lifestyle and internalize a mode of thought similar to what might be encouraged by a basic income.

This present piece is not an argument for basic income. On the contrary, it functions in part as a disclaimer on my own support for the idea. Of course I support a basic income, one might conclude; a basic income would help to sustain a lifestyle like the one to which I’ve grown accustomed, and it is difficult to give up what one has known and enjoyed. It is also an partial explanation of why I came to certain specific views and conjectures about the potential merit and effects of a basic income.

The following are nine conjectures about basic income that I developed due to my own experience:

  1. It would be easy to take a basic income for granted.
  2. A basic income might prevent the conflating of work (and worth) with paid labor.
  3. A basic income can promote lower consumption in the long-term.
  4. A basic income would facilitate living without long-range plans.
  5. A basic income could allow precarious jobs to be the most appealing jobs.
  6. A basic income could enable social isolation.
  7. A basic income would not “cure” anxiety.
  8. A basic income could enable individuals to make no useful social contributions.
  9. A mere “personal basic income” can make one feel alien.


1. It would be easy to take a basic income for granted (no pun intended).

This, I believe, is the crucial lesson, and it lays essential groundwork for all that follows.

When basic income proponents ask “What would you do if your income were taken care of?” they want the audience to fantasize about the myriad benefits a basic income could confer upon their lives (and, ideally, to imagine the ways in which they could use their good fortune proactively).

But when a guaranteed basic income is all one has ever known, it doesn’t feel liberating. It doesn’t feel special. It doesn’t spur one to better oneself. It is simply part of the ordinary state of existence, a silent component of the background conditions for everyday life.

When I headed off to college, I didn’t think, “Hey, cool! I have free tuition, a living stipend, and I’m relieved of working in a job; I think I’ll really make something of myself and contribute to the world!” No, not at all. Instead I thought, “Hey, cool; I have a living stipend! Now I’ll continue taking classes, as always, but I’ll get to live alone in my own apartment!” Arguably, the main effect of my job-unconditional income was to enable me to retain the mentality of a studious high-schooler: I ?took for granted that my basic needs would be met, that my main purpose was to study and learn, and that a job would just be a burden.

Of course, by contrasting this experience with that of those who lacked such financial good fortune, I can come to see that a basic income (or full-ride scholarship) entails freedom from much stress and overwork, and, in principle, opens the door for great accomplishments. However, I never truly felt freedom or relief, for I never knew a “before time” when I lacked my income guarantee.


2. A basic income might prevent the conflating of work (and worth) with paid labor.

I am ceaselessly baffled by the contention that people need jobs in order to feel a sense of purpose and self-worth, as well as the frequent assumption that when individuals are not at work in a job, they are idling away their time in passive leisure.

None of this is natural. Indeed, it is not what we learned as children. As children, we did not hold jobs, and yet our time was not one homogeneous block of undifferentiated recreation. We did not work for pay, and yet this did not entail that all of our activities were worthless.

Gulf Coast Regional Science Olympiad

When we were children, we had our schoolwork, which we were generally supposed to prioritize. We might also have had some organized extra-curricular activities like sports, band, debate, drama, or Science Olympiad, or various clubs in our schools, churches, and communities. These organized activities were also generally encouraged by our elders, as long as we did not pursue them to the detriment of schoolwork. Finally, we had “free-time”–and, even then, certain recreational pursuits (e.g. reading novels) were told to us to be more worthwhile than others (e.g. playing the Nintendo).

We were paid for none of this, of course, ?and yet we did not conclude that our activities were thereby equally valuable (or, perhaps better put, equally valueless).

Moreover, when we did grow old enough to take jobs, unpaid schoolwork (mark that: “school-work) was usually still considered more important than paid job-work. We were subject to censure by teachers and parents if our paid work compromised our performance in our unpaid work.

At some point, apparently, many unlearn these truths that still seem obvious to me–that paid work and passive leisure are not exhaustive categories, that unpaid activities can be valuable, that unpaid activities can be work, and identify and self-worth can be found outside of the labor force–though, to be sure, I don’t know precisely when, why, and how this unlearning occurs. If the necessity of finding paid work is a contributing influence, however, then it might be said that a job-independent guaranteed income helped to prevent my unlearning of these truths.

As I said above, I was able to continue to live with (roughly) the mentality of a high-schooler, taking for granted that my basic needs would be met, that a job would just be a burden, and that my main purpose was to study. That said, there were occasions when I’d find myself with extra time, feel uninspired to make any productive use of it, and think to myself, “Well, I might as well take up a part-time job…” In these times, however, paid employment always felt like a path of last resort, a last-ditch effort to mask a transient but troublesome feeling of unproductivity or worthlessness. I could (and did) justify job-hunting by telling myself, for example, “I will earn money to save so that I can ‘buy more freedom’ for myself in the future, once my inspiration has returned.” Nonetheless, I would continue to feel somewhat ashamed of my failure to find my own intellectual or creative activities to which to devote my time; a job always seemed like something of a cop-out.


3. A basic income might promote lower consumption in the long-term.

My personal experience is the main reason that I have become interested in the supposition that a basic income could encourage degrowth. Because I entered adulthood with something like a basic income, I grew accustomed both to minimal consumer spending (since my stipends afforded only a basic “no frills” lifestyle) and to substantial freedom and flexibility in structuring my time.

Yes, the thought more money and greater purchasing power was (and is) often alluring; however, I never found it sufficiently attractive to tempt me to pursue a lucrative career. Instead, since I have always had the option of greater freedom, I have almost invariably chosen it–even though this has required me to content myself with significantly less consumption than a well-paying job (or even a modestly paying one) would have allowed. And this, importantly, has never felt like a sacrifice. I truly believe there is no salary high enough to motivate me to work a 40-hour job for the next 30 years–as long, that is, as it remains possible for me to afford my basic needs while spending little or no time in standard structures of employment. Having grown to know and cherish it, I feel my freedom has no price.

Tiny Home, CC BY-NC 2.0 Todd Lappin

It is significant here, though, that this “basic income lifestyle” is simply the life to which I adapted; it is, in essence, all I’ve known. I doubt that many individuals who earn, say, $40k per year in full-time jobs (an amount well beyond my highest annual earnings, yet slightly below the US median individual income) — let alone those with higher earnings — would want to leave their jobs to live on the much more modest amount of an unconditional basic income. For many, working a full-time job has become a natural part of life, and so has the lifestyle that their salary can afford.

It is difficult to give up the pleasant aspects of a lifestyle to which one has grown acquainted — whether this is freedom and flexibility, as in my case, or more lavish consumption, as in the case (presumably) of many individuals with full-time jobs in successful careers. Meanwhile, it is fairly easy to persist in something that has come to feel like second nature, even if mildly unpleasant, whether frugality in consumer spending (as in my case) or the confines of standard employment (as for many others).

A lifelong basic income has the potential to transform that to which individuals become habituated. It is on this basis that I conjecture that a basic income has the potential promote lower levels of consumption and economic growth.

This is also, incidentally, one reason for which I am skeptical about the ability of basic income pilots to reveal anything interesting regarding the long-term effects of an income guarantee on labor and consumption. If a person begins to receive a basic income after having already grown habituated to full-time employment and the lifestyle of earning-to-consume, then it might be highly unlikely that she would choose to leave the paid workforce and subsist on her comparatively meager basic income payments. But the situation could be much different in a society in which youth begin to receive a basic income before they have experience as either full-time laborers or high-volume consumers.


4. A basic income would facilitate living without long-range plans.

“Stop No Path This Way” CC BY-SA 2.0 Mark Longair

It is sometimes argued that a basic income would better enable individuals to plan for the long term, given its ability to mitigate the scarcity mindset and survivalist thinking engendered by poverty or economic insecurity (see, e.g., Louise Haagh’s article “Basic Income’s Radical Role” in Social Europe).

It has been my experience, however, that work-independent financial security can also produce the opposite effect: if one is guaranteed long-term economic security, then one is thereby relieved of the need to plan job and career goals oriented towards minimizing the chances of future economic hardship. Indeed, if one knows that one has long-term financial security, then one needn’t plan for the future at all, economically speaking, as long as one is able to live within one’s “basic” means. In other words, a stable and reliable work-unconditional income can permit individuals who might otherwise plan and act upon long-term career goals to think only in shorter terms, pursuing present interests with little or no concern for how these present tasks might promote employment or career advancement in the future. This is, at least, how I have always lived, continue to live, and desire to live.

The idea that basic income can enable risk-tasking is nothing new or unfamiliar. Notably, Facebook CEO Mark Zuckerberg recently recommended consideration of the policy for precisely this purpose. Most commonly, however, this idea is raises in arguing that basic income can promote entrepreneurial activities, in which the risk is assumed for the sake of pursuing a specific long-range project or goal. But deliberately and intentionally living without a plan — choosing to remain open and adaptable to unplanned opportunities and the ever-changing natural flow of life — is itself a type of “risky” lifestyle.

Those with conventional “careerist” values might read the above passage as admission that the feeling of financial security provided by a basic income can be mentally and morally degrading. It seems that many consider it a mark of good character to plan for the future and devote oneself to long-term career ambitions–and a character flaw not to do so.

I can only ask, then, that we critically reexamine the moral importance we place on career-oriented thinking. I have personally embraced my relative economic security as way to eschew careerism — to live and work in a way that is maximally flexible and adaptive to my evolving interests, abilities, social networks, external demands, and whatever unanticipated possibilities may arise. For me, this may be the single most liberating thing about my lifestyle — as well as the key source of my excitement and fascination with life — and I am hard-pressed to see it as wrong.


5. A basic income could allow precarious jobs to be the most appealing jobs.

As I mentioned near the outset of this piece, I have never worked a full-time job or signed an employment contract longer than a year. And this is no dismal fate but, rather, my ingrained preference and my incredible luck. It is one of my greatest hopes to maintain this lifestyle for as long as possible, primarily due to the flexibility that it allows, and its ability to sustain the “anti-careerism” described in the above section.

Having grown used to a stable but basic income, I have acquired a taste for jobs that can be picked up when in want of extra spending money and abandoned as quickly as possible after the desired sum of money has been obtained. I often found it desirable to earn a little more than my basic living stipend; at the same time, as discussed above, I could never imagine relinquishing freedom and flexibility for a full-time and permanent job, even a well-paying one.

“Gig Economy Graphic” CC BY 2.0 Mark Warner

Traditional full-time permanent positions seldom permit employees to work just enough to gain a desired sum of income — much to the frustration of those of us who identify with Max Weber’s classic description of the pre-industrial piece-rate worker: “A man does not ‘by nature’ wish to cam more and more money, but simply to live as he is accustomed to live and to earn as much as is necessary for that purpose.”

In contrast, “gig work” makes it easier to adjust the amount of one’s work to one’s desired income level, avoiding excessively confining commitments to jobs.

Proponents often speak of basic income as an “exit option” from employment, as if an independent source of financial security is enough to allow individuals to quit their jobs. But this strictly economic picture of employment obligations seems almost to fetishize money-making and downplay social norms in a manner reflective of the very status quo values that (in my view) a basic income should help us to overcome. The economic view of “exit” neglects the ethical importance of loyalty and trustworthiness: when I sign a contract, or otherwise give my word that I will follow through on certain tasks and duties, I consider myself bound to complete the work I have promised — irrespective of whether I am paid for that work, and irrespective of whether I can make a living for myself apart from that work. If one is under a long-term contract, the option of “exit” can pose ethical and psychological conflict even if one has the financial wherewithal to leave a job (and, we might add, even if one believes that one’s personal interest would be bettered by leaving the position).

That is, I have found that job flexibility is most easily attained not only by having access to a financial safety net but also by adopting more short-term and easily abandoned forms of employment. If a basic income enables individuals more easily to exit jobs, this is not merely due to its provision of a safety net but also due to the fact that this safety net allow individuals to avoid long-term contractual agreements in the first place (though I will admit that I myself am somewhat conflicted over the ethicality of this recommendation to avoid long-term commitment to employers).


6. A basic income could enable social isolation.

“The lonely woman” CC BY-NC-ND 2.0 Johan

In the spring of 2016, I managed the Facebook page of the US Basic Income Guarantee network. I recall sharing an article entitled “Will the Universal Basic Income make us lonely? (written by Oxford fellow Max Harris) and feeling rather disillusioned by the comments, which, I felt, often failed to engage sympathetically with Harris’s concerns.

Many commenters reacted as though the very suggestion that basic income could cause loneliness was utterly ridiculous. Some pointed out that (no doubt accurately) a basic income would permit many individuals to have a enjoy richer social life that they can currently manage. None replied that a basic income could indeed facilitate a potentially harmful reduction of social activity for some people. Although just a fledgling basic income writer at the time, I was inspired to write my own reply to Harris’s article, attempting a more charitable and nuanced treatment of the loneliness worry.

There was a reason that I took the loneliness worry as seriously as I did (and do): my own job-independent income helped to enable me to lead a life of fairly extreme social isolation. There’s little doubt that any sort of on-site job would have forced me to have more social interaction than I voluntarily chose during my college years. My nearly unconditional stipends permitted me to follow my natural tendency to seclude myself and work in solitude; a job, on the other hand, would have compelled me to act against it. To be sure, being very much an introvert by nature, I didn’t want additional social interaction. I didn’t feel lonely. Indeed, I would have objected vociferously if I had been required to relinquish my substantial alone-time, especially when busy with solitary work or other activities I found enjoyable. Its naturalness, however, doesn’t imply that my high degree of social isolation was healthy, and I later came to recognize that it was not.

We should admit that, in some cases, a basic income could facilitate unhealthy behaviors that a forced regime of paid employment could counter. Social isolation is one such behavior: some of us are disinclined to engage in social interaction when it’s not forced upon us; when it becomes voluntary, we naturally tend to abstain. With a basic income, then, we must force ourselves to do what, in other circumstances, the demand to earn a living might have forced upon us. We need to take it upon ourselves to ensure that we receive a healthy dose of social interaction — and sometimes, when it’s easier and seemingly “more natural” not to do so, we won’t.

Now, this is no more a reason to oppose basic income than “Some people won’t exercise if they aren’t forced to work in the fields” would have been a reason to oppose the mechanization of agricultural. But it is a possible outcome that does merit consideration.


7. A basic income would not “cure” anxiety.

In May 2017, basic income social media witnessed a viral spread of stories claiming that Finland’s basic income experiment was already showing a reduction in stress and anxiety. Although these particular stories apparently had their source in sensationalistic reporting of a single anecdote, the supposition that a basic income would reduce stress and anxiety is nothing new — and for good reason: economic hardship and income instability are major sources of stress and anxiety for many people (as is, on the side of the spectrum, overwork).

“Anxiety” CC BY 2.0 Kevin Dooley

At the same time, however, many cases of stress and anxiety are not attributable to financial insecurity, poverty, or overwork. I know this firsthand: I have never experienced great economic difficulty, nor overwork (other than that brought on by my own perfectionism), and yet I have been affected by generalized anxiety disorder.  Anxiety is an adaptable tormentor; it can find innumerable other potential sources of anxiety — as trivial as they might seem to others — to which to affix. 

I often grimace, then, when I read particularly roseate predictions of the ability of basic income to alleviate anxiety — or, for that matter, any mental illness. Quite likely, a basic income would present significant advantages to sufferers of mental illness, especially those whose conditions prevent them from working (or from working steadily in full-time jobs), when compared to current systems of conditional welfare benefits. It would allow people security in their lives, and give them the time needed to help them grow more stable. But a basic income is no panacea.


8. A basic income could enable individuals to make no useful social contributions.

I have spent most of my adult life as a professional student, receiving stipends to study, and choosing my courses of study with no regard for either employability or ability to contribute to society. And, to show for it, I have indeed made no great social contributions.

Certainly, I’ve never been the stereotype of the lazy person content to live on her basic income payments; I’ve never been one to spend my days smoking weed and playing video games. On the contrary, I have a natural desire to feel productive, including (perhaps especially) during weekends and holidays, and it must have taken years for me years to overcome workaholic tendencies that made it difficult to enjoy leisure activities from socializing with friends to simply gazing at a beautiful sunset.

But what it is to have the natural drive to “feel productive”? Well, for one, it can be a drive to further one’s own learning and development — irrespective of whether one uses one’s skills and knowledge in any way whatsoever for the betterment of others or society. By divorcing the means to a living from the demands of the marketplace, a basic income could better enable individuals to pursue art for the sake of art, science for the sake of science, and so on. For me, this has long been integral to the appeal of the idea — even before a “basic income” of sorts came to feel like an established part of my life. It must be admitted, however, that one consequence is that artists, scientists, and other self-motivated individuals would also be free not to publish or promote their work in any way, burying any potential social contributions. (And this is not to mention that a world of self-directed artists and scientists would still have a need for those who will tend to individuals’ medical needs, repair roads and bridges, clean sewers and collect garbage, and so forth. But that is another essay, for another time.)

I believe I’ve done well for myself: my life doesn’t lack for happiness, meaning, or identity, despite (or perhaps because of) my persistent low income and lack of anything resembling a stable career. Nonetheless, there is little doubt that I could have done better for the world. I was, for one, a pretty decent STEM student; it’s possible, I suppose, that I could already have contributed to great advances in technology to improve the lives of millions. Instead, having the means, I chose to spend years engaged in pursuits such as (for example) the study of a narrow sub-sub-field in contemporary analytic philosophy of language. Moreover, because I chose such activities merely for the personal intellectual challenge, I never bothered even to try to publish or distribute my work.

All that being said, I should mention that a basic income is not unique in permitting individuals to survive without contributing to society. Perhaps most obviously, we might imagine the “idle rich” living from inheritance, trust funds, and interest earnings. Moreover, and more importantly, the fact that an activity is profitable does not imply that the activity is socially beneficial (think of those who make a living in the “manufacture of demand” — getting people to buy things they otherwise wouldn’t even want — or, say, patent sharks). This does not imply, however, that tu quoque is an adequate response to the common concern that a basic income would permit free-riding on the societal contributions of others — for, simply put, a basic income would permit free-riding on the societal contributions of others.


9. A mere “personal basic income” can make one feel alien.

I have spent much of my adult life feeling like an outsider to much of my own culture — largely due to my rejection of career culture and other attitudes that I believe to have been engendered by the “BI-like” aspects of my early adult life.

I recall that, by the time I reached 20 years of age, I was already tired of living in a world in which success was equated with personal ambition or, more specifically, personal ambition as played out in a career in paid employment. There were those who wanted to advise me on how to achieve “success” and yet insisted upon projecting their own definition of that notion onto me. It felt, in those days, like there was no one with both the knowledge to offer good guidance and the open-mindedness to hear me out on my own interpretation of “success” and the good life. I embraced anti-careerism as part of my values and identity. I saw nothing inherently wrong with myself. I saw my situation as a case of organism-environment mismatch, and I was happy with the organism, just not the environment. Sometimes, when I felt particularly at odds with the job- and career-focused culture that surrounded me (but powerless to change it), the prospect of never contributing to society actually felt good — itself an act of rebellion.

Would my young adult years have been different ?if I had been born into a society with basic income already in place? Would I have been more eager to contribute my talents in a socially productive way if I had felt a less pronounced sense of “organism-environment mismatch”? I can’t say. Perhaps, even in utopia, all youth must go through their stage of rebellion and angst.

Still, I think, there’s an important point that transcends the rebellion and restlessness of youth: having a “personal basic income” in our present culture –? obsessed as it is with jobs, careers, consumption, and economic growth — ?is likely much different from having the same in a culture in which GDP is not the measure of societal success, income is not the measure of personal success, and education is encouraged for its own sake, not merely as a means to attain a good job. And, quite likely, it would take a universal basic income, or something like it, to pave the way for these latter large-scale cultural shifts.

What a financially self-sufficient individual would do in a society of financially self-sufficient individuals is different potentially much different than what the same financially self-sufficient individual would do in a society like ours, in which nearly all other people continue to rely on full-time employment as a means to earn a living.

In May 2016, campaigners for Switzerland’s basic income referendum presented the world with the “world’s biggest question: “What would you do if your income were taken care of?” Having lived with a job-unconditional income guarantee, however, I realize that there is a much bigger question: “What would you do if everyone’s income were taken care of?”


Reviewed by Tyler Prochazka.

Cover Photo: CC BY 2.0 Generation Grundeinkommen

The Netherlands: All that’s left is the action. Where do we stand with the experiments?

The Netherlands: All that’s left is the action. Where do we stand with the experiments?

The permission to start the social assistance experiments depends on the political will of politicians at the national level. Despite obstructions, several municipalities are determined to continue with the experiments for the sake of that part of the population that is suffering under the current social welfare regime.

It’s time for new forms of social security, says Sjir Hoeijmakers in a presentation held during the annual meeting of the Dutch branch of BIEN on May 7, 2017. He begins his lecture by stressing that he prefers to speak of ‘experiments in the context of the Participation Act’, instead of ‘basic income experiments’, because they don’t fulfill BIEN’s definition of an unconditional basic income. More on the subject can be found in this thoroughly composed article. However, to smooth the conversation, he cautions that he would probably fall back in the habit of talking about ‘basic income experiments’.

According to Hoeijmakers, an econometrist who crowdfunded his own income for two years in order to support municipalities who want to study alternative forms of social assistance in scientific research projects, we need a system that is based on trust, freedom and income security. A basic income can do that. However, nobody knows the short or long term consequences of the implementation of such an income, because it has never done before. Hence, we need to do experiments, investigate as many aspects as possible and launch a broad debate.

Background

The ideas for the experiments were mainly born out of discontent with the Participation Act. Under this law, introduced in 2015, the municipal executives are obliged to stimulate welfare recipients to look for a job and to accept paid work, as well as to provide social benefit payments to its inhabitants who need such arrangements.

The implementation of this law at the local level requires a complicated set of rules, obligations and restrictions. In order to ensure a welfare recipient’s integration into the workforce and to prevent fraud, the local bureaucracy has to develop many regulations regarding, e.g., the imposition of fines and payment reductions, the appropriate use of disciplinary punishment or the application of rebates for people who live together.

A newly introduced measure is the so-called ‘compensation’ (Dutch: ‘tegenprestatie’). A welfare recipient has the obligation to do something in return for the payments. This can be voluntary work, but one can also be forced to ‘gain work experience’ in a commercial enterprise. The obligation can go as far as requiring unpaid work for six months. Some organizations who have stood up against this policy have already called it ‘forced labor’. The kind of ‘compensation’ is to be decided by the civil servant of the municipality, who is in charge of the implementation of the Participation Act. This practice is highly susceptible to arbitrariness and is therefore very unpopular among recipients.

Because of the complexity and far-reaching consequences of the law, the local government has to allocate a lot of money and manpower for control and enforcement. In the meanwhile, the social welfare system has lost its function as social safety net by the dreadful accumulation of inspection, monitoring and sanctions. Additionally, as a result of the continuing exerted pressure, beneficiaries accept less instead of more paid or voluntary work leading to alarming levels of impoverishment among this group. At the same time Dutch trend watchers predict that in ten years less than thirty percent of the population will be engaged in full-time paid work. The rest will earn money with ‘loose jobs’.

A normative framework

For these reasons, municipalities have begun to design experiments within the existing social assistance scheme. In the Netherlands income distribution and taxes (except municipal taxes) are regulated at the national level. Municipalities are not allowed to implement income policy. However, it’s the local government that is responsible for the provision of social assistance.

After a long period of lobbying by the municipalities, the Ministry of Social Affairs and Employment has finally released its general administrative regulation (Dutch: Algemene Maatregel van Bestuur / AMvB). This sets out the exact standards for the implementation of a law. The social assistance projects must be tested to the AMvB. A city council can apply for an experiment based on this document by requesting an exception to the law, for example, to temporarily suspend reintegration requirements or to allow people to earn an extra income on top of the benefit payments. The municipality is required to carry out the experiment according to the terms of the document. The framework causes many problems, because the AMvB only allows for exceptions to the law in individual cases and not when it comes to groups.

sjir-hoeijmakers

Sjir Hoeijmakers

Unfortunately, the AMvB has become the subject of political controversy, as Hoeijmakers notices. That’s why additional stipulations have been added to the experiments and compromises have to be made. For instance, the projects must be now carried out in a relatively short time, and people who make too little effort to get work can be excluded from the experiments, which makes the whole project a bit weird. As Hoeijmakers explains, all these irritating requirements make it very difficult to set up a good scientific and ambitious project. At all political levels, there are often a few people who support or sabotage the idea. Yet, city councilors and researchers are determined to overcome the obstructions and are actively seeking smart, legal solutions to bypass the Participation Act.

In the previous cabinet consisting of VVD and PvdA, it was very difficult to reach agreement over the AMvB. A majority in the Second Chamber (or House of Representatives) was in favor of the proposed experiments, but the government was not. Especially the VVD (People’s Party for Freedom and Democracy; Dutch: Volkspartij voor Vrijheid en Democratie), a conservative-liberal political party in the Netherlands, had many objections to experiments that could emancipate welfare in the long run by introducing a basic income. Members of the PvdA (Labour Party (Dutch: Partij van de Arbeid, the social-democratic party) at the local level are usually in favor of experiments in contrast to members of the cabinet. In the last months, several municipalities have stopped the preparations because of all the difficulties. In an ideal world, Hoeijmakers comments, you would expect that the national government plays a stimulating role, ensures proper tuning of the experiments and good scientific coordination. This is not the case. Municipalities also lacked financial support from the government, despite of all the rhetoric about decentralization and being open to experiments.

Hoeijmakers explains that 45 municipalities are considering experiments with social assistance policy:

  • Seven have submitted an application, among which the four forerunners Wageningen, Tilburg, Groningen who submitted their proposal in April. Utrecht wanted to start the experiment on May 1st, but the trial is postponed because the Ministry of Social Affairs and Employment (SZW) has still questions about the design. A few days after the presentation all seven municipalities received a response from the ministry with further questions and instructions about the experiments they had proposed. Tilburg’s responsible alderman (Christian Democratic Appeal / CDA) reacted furiously: “It is a bold from the blue! But we will continue with or without the blessing of the Secretary of State.”
  • Eight municipal governments are considering an application.
  • Thirty are considering alternatives. As exemplified by the experiment in Terneuzen, a small town that wanted to give a basic income of 933 euros with no strings attached to twenty benefit recipients to test how it works. However, after a news break on national television, the State Secretary for Social Affairs and Employment (PvdA) quickly torpedoed the plan. Here’s the clip (in Dutch) of the news item. There is also much hassle around an article in the AMvB indicating that the municipality is obliged to have a regulation regarding the ‘compensation’ and how it should be implemented. Multiple municipalities, for instance Amsterdam, don’t execute this directive perfectly, and that can be a reason for the Ministry to reject the application. A few days ago, the NRC, a daily paper mostly read by the establishment, came up with an article titled ‘Municipalities no longer listen to Klijnsma’ [the State Secretary of the Ministry of Social Affairs and Employment; PvdA], written in boldfaced headlines. In the article Amsterdam’s alderman for Work, Income and Participation, Arjan Vliegenthart (SP, Socialist Party) expresses his anger: “We are not going to wait for Klijnsma’s approval. We are going to start our own pilot projects.”

Hoeijmakers expects that the number of municipalities who actually will start an experiment will be around 10, although there is room for 25.

Political Outlook

Hopefully the new cabinet will become more positive about social assistance experiments. The Dutch general election of 2017 was held on Wednesday, 15 March 2017. Several small parties who were in favor of a basic income (a.o.Piratenpartij / Pirate Party, Basisinkomen Partij / Basic Income Party, Vrijzinnige Partij (VP, Liberal Party; leader: Norbert Klein) did not win a seat or lost its only seat (VP). On the other hand, GroenLinks (GreenLeft), D66 (Democrats 66), Partij voor de Dieren (PvdD / Party for the Animals) who are strongly supportive of pilot projects, all three won considerably: 10, 7 and 3 seats respectively. The PvdA lost substantially (29 seats). The new Members of the House of Representatives were installed on 23 March 2017. At least four parties are required to form a coalition with a majority (76 seats). At this moment VVD, CDA, D66 and GreenLeft have failed to build a new coalition.

According to Alexander de Roo, chairman of the Dutch branch of BIEN and co-founder of BIEN, the ratio between the left and the right in the Second Chamber is approximately 60 to 81 seats, assuming that a basic income is more popular among voters of left-wing parties than among parties at the right-wing. But this is not necessarily true. He proposes to cooperate with D66, GL and the PvdD in an effort to keep basic income on the political agenda.

Hoeijmakers emphasizes that it’s important to create a broad political support base. So, how can you introduce the basic income into the liberal tradition? Much depends on the framing of the message, stresses Hoeijmakers. He is convinced that a right-wing public is also susceptible to good arguments, at least for doing experiments, when you explain what is in it for them. For instance, what can a basic income mean for entrepreneurs, or for the complexity and bureaucracy of a government? It is very useful to show successful experiments done in other countries. The spin-off of these reports cannot be overestimated. They are very stimulating. Looking forward, it is inconceivable that we do not start experimenting with alternatives for the current social security system, we have to learn, tell stories. It will bring us to the day when people will say: Of course we want a basic income, of course we want to know the effects of its introduction! “I always advise the municipal authorities to continue with their basic income projects. Just do what you can do,” says Hoeijmakers. In conclusion, he points to Rutger Bregman, who stated in his Tedtalk (Vancouver, April 2017), “We already have the means, the research, and the need for basic income. All that’s left is the action.” According to Business Insider, “He [Bregman] got a standing ovation“ for the talk. Watch the video here.

Rules are tools. But it is impossible to rule out the human experience.”
Credit: Benno Baksteen, retired pilot of KLM (Royal Dutch Airlines)

Credit Pictures CC Fidgit the Time Bandit and Hans Lindeijer

Thanks to Ad Planken and Kate McFarland for reviewing this article